Banks to miss deadline to upgrade ATMs

Banks around the world, consumed with meeting more stringent capital regulations, will miss a deadline to upgrade outdated software for ATMs and face additional costs to Microsoft to keep them secure.

The US software company first warned that it was planning to end support for Windows XP in 2007, but only a third of the world’s 2.2 million ATMs that use the system will have been upgraded to a new platform, such as Windows 7, by the deadline next month, according to NCR, one of the biggest ATM makers.

To ensure the machines are protected against viruses and hackers, many banks have signed deals with Microsoft to continue supporting their ATMs until they are upgraded. These extra costs and negotiations were avoidable but are now likely to be a distraction for bank executives.

“There are certainly large enterprise customers who haven’t finished their migrations yet and are purchasing custom support,” a spokesman for Microsoft said, declining to name those customers or to quantify the extra revenue that the company was earning.

“The cost will depend on both the specific needs of the customer and what support they already have in place, so it’s different for every customer.”

Britain’s five biggest banks – Lloyds Banking Group, Royal Bank of Scotland, HSBC, Barclays and Santander UK – either have taken out, or are in the process of negotiating, extended support contracts with Microsoft.

The cost of extending support and upgrading to a new platform for each of Britain’s main banks would be in the region of £50 million (R890m) to £60m, according to London-based Sridhar Athreya at financial technology advisers SunGard Consulting Services – an estimate corroborated by a source at one of the banks.

Athreya said banks had left it late to upgrade systems after being overwhelmed by new regulatory demands in the wake of the 2007/08 financial crisis..

About 95 percent of ATMs worldwide run on Windows XP.

Doug Johnson, the vice-president for risk management policy at the American Bankers Association, said there were about 440 000 ATMs in the US and many of the banks operating them would still be running them with Windows XP for a while after the April 8 deadline.

The queue of banks waiting to upgrade means there are not enough people to do the work.

“One thing in our favour is that XP is battle-hardened,” Johnson said. “People will benefit from years of fine-tuning of XP… It has been through wars.” – Reuters

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